Hewitt attacks US for jumping the gun over corporate clean-up legislation

Patricia Hewitt will tonight launch an attack on the hurried new legislation introduced by US lawmakers to clean up corporate America and restore investor confidence in the wake of the Enron and WorldCom scandals.

The Secretary of State for Trade and Industry will criticise the measures as an example of "legislating in haste and repenting at leisure". She will single out the failure of the US to consult internationally or consider the effect of the legislation on UK companies that have stock exchange listings in the US and foreign audit firms.

Ms Hewitt's attack comes as Harvey Pitt, the much-maligned chairman of the Securities and Exchange Commission, gave the first hint that the US may yield to international pressure and grant some exemptions to non-US companies. Mr Pitt, who is due to meet European ministers at a conference in Brussels later this week, yesterday said America was receptive to the concerns of overseas companies. "The US does not not have all the answers," he added.

The Sarbanes-Oxley Act, rushed through in the wake of a string of corporate scandals that sent stock markets crashing, contains powers to imprison chief executives for 20 years and fine them up to $5m (£3.2m) if they make misleading statements about the financial state of their company. The act applies equally to US companies and foreign companies with US listings.

Ms Hewitt will tell a gathering of the 100 Club, which is made up of finance directors from FTSE 100 companies, that while she understands the motivation behind the US legislation, it was introduced in too much of a rush.

She will repeat that message in a conversation later this week with the US Commerce Secretary, Don Evans. The section of the Act relating to compliance among US-listed foreign companies has already been introduced on to the statute books. But other sections, such as that dealing with the position of non-US audit firms, have yet to be implemented. The Government wants exemptions for UK companies that are already complying with UK standards of corporate governance and disclosure to avoid extra costs being forced on them.

A Whitehall source said: "It is true that there are some powers in the act to exempt foreign audit companies from some of the oversight requirements but as yet we have had no indication from the US as to whether and how these powers are going to be used."

Ms Hewitt will also publish a consultation document today, setting out plans to reform the regulation of the accountancy profession.